5 Tips for Trading Cryptocurrencies

One of the most substantial characteristics of the cryptocurrency
market is its volatility. Different digital assets are known to swing
violently in a short period, unlike other more traditional assets.

This
volatility is seen by some as a negative, but experienced traders know
that it can also be very profitable. Trading cryptocurrencies could be
very challenging. However, if done correctly, it can also net nice
gains. Having said this, below are a few tips that can definitely help
step up the game and take advantage of the slightly different nature of
the crypto market.

Tip 1: Do Your Homework

This one is
perhaps a broader tip which applies to every single investment you make,
and cryptocurrencies are no exception. The very first thing you need to
do before you decide to put your hard-earned cash into a digital asset
is to research it.

Take a look at the documentation which is
available for the cryptocurrency. Learn about the project’s goals and
correlate them to the current and potential future market conditions.
Make sure that it’s viable and that it has room to grow in the short and
long term.

Take a look at the team members and make sure they are
real people with relevant experience. There are hundreds of projects
which turned out to be blatant scams fueled by non-existing social media
profiles.

Do your homework – research. It’s the first step to
take before you venture into a particular cryptocurrency and put your
money on it.

Tip 2: You Can Make Money Even Under Bear Market Conditions

A
popular misconception is that you can only make money when the market
rises in green. That’s not true. There are different trading mechanisms
which allow you to make money when the price drops as well.

For instance, you can short Bitcoin
if you think that the price is going to start dropping. There are some
margin trading platforms which allow it. This way, you can benefit from
negative trends as well.

In fact, leveraging short positions can
help you diversify your trading strategy and maximize your profits.
That’s the difference between an experienced trader and one who isn’t
aware of all his options.

Tip 3: Manage Your Risk

If you
want to be a successful crypto trader you need to have the bigger
picture in mind. You shouldn’t be looking for the next ‘moon’ but rather
take advantage of smaller market moves which will regularly add up and
net you a substantial profit.

Make sure to manage your risk wisely
throughout your entire portfolio. When it comes to non-liquid markets,
you shouldn’t invest more than a smaller percentage of your portfolio
because the risk is relatively higher.

Keep your investments in a
range that you can afford not based on your overall resources but based
on your investment portfolio. Make sure that each trade you do is
consistent with this strategy and keep all feelings aside.

Tip 4: FOMO – Keep it in Mind

The fear of missing out (FOMO)
is perhaps one of the most commonly used terms within the
cryptocurrency community. It describes a situation where a particular
cryptocurrency experiences a sudden increase in value and people are
usually tempted to buy in in order not to miss out potential gains.

However,
in situations like that, it’s not uncommon to be on the losing side of
the trade. It is entirely possible for the price to continue pumping but
then again, this is a decision that you should make based on robust
factors, not on a quick pump and subjective sentiment.

Therefore,
it is particularly important to resist FOMO and to make sure that even
if you buy in the surge, you are making it because you know what you’re
doing rather than just following the herd.

Tip 5: Set Your Ego Aside

This
is perhaps a continuation of all of the above. When trading
cryptocurrencies, you need to make sure that your ego is set somewhere
distantly as it has no room in trading.

Your decisions should be
made solely on facts and nothing else. Sure, you’re likely to know the
phrase “my gut is telling me to do so,” and in some cases, your “gut”
might be right. But if you want to be consistent in your profits, you
need to leave this thinking aside.

These are just a few tips that
you might want to keep in mind when it comes to trading
cryptocurrencies. Of course, there are other essential considerations
but if you are just venturing in the field, keep these in mind.

About

The eCoin is a media that intended to deliver news and information related to the cryptocurrency and Bitcoin market.
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Disclaimer

Neither the author nor the publication assumes any responsibility or liability for any investments, profits, or losses made as a result of this information. Cryptocurrency trading and investing are risky propositions, and market participants are advised to always conduct thorough research.